(Appendix 2A) Look Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, N06D and M09K, about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $2,532,200 and the company's estimated total direct labor-hours for the year is 44,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-The manufacturing overhead that would be applied to a unit of product M09K under the activity-based costing system is closest to:
A) $76.73
B) $92.08
C) $11.00
D) $168.81

Question

(Appendix 2A) Look Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, N06D and M09K, about which it has provided the following data:
  The company's estimated total manufacturing overhead for the year is $2,532,200 and the company's estimated total direct labor-hours for the year is 44,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
  
-The manufacturing overhead that would be applied to a unit of product M09K under the activity-based costing system is closest to:
A) $76.73 
B) $92.08 
C) $11.00 
D) $168.81

Quizplus · Accepted Answer

The activity rates for each activity cost pool are computed as follows:
 11ea7761_198b_8bb6_81a5_4dcfaacdcdcf_TB2580_00 The overhead cost charged to Product M09K is:
 11ea7761_198b_b2c7_81a5_1994ace399bf_TB2580_00 Overhead applied to a unit of product M09K = $1,151,000 ÷ 15,000 units = $76.73 per unit

(Appendix 2A) Look Manufacturing Corporation Has a Traditional Costing System